First-time home buyer grants and programs that cut your upfront costs

Written by Samantha SheltonNMLS 1647301Updated October 2026

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Program terms, funding availability, and the tax treatment of assistance and mortgage credit certificates change, and how they apply depends on your situation. Consult a qualified professional about your situation.

First-time home buyer grants and programs attack the two costs that stop most buyers, the down payment and closing costs, and assistance commonly runs from a few thousand dollars to $10,000 in statewide programs, with a handful of county programs reaching $100,000. Most use HUD’s definition of a first-time buyer: anyone who hasn’t held an ownership interest in a principal residence during the past three years. That window is why plenty of former homeowners re-qualify.

Help arrives in four shapes, grants, forgivable loans, deferred zero-interest loans, and below-market first mortgages, and your state housing finance agency is almost always the front door. In Michigan that’s MSHDA, whose MI 10K DPA Loan puts up to $10,000 toward closing as a 0% loan you repay when you sell, refinance, pay off the first mortgage or stop living in the home.

Learn how first-time home buyer grants and programs work, including which type of assistance you’re actually being offered, what income and credit limits apply, and the education course nearly every program requires. If you’re earlier in the process, start with our Home Buying guide.

Key takeaways:

• The three-year rule decides who qualifies: Most programs treat you as a first-time buyer if you haven’t owned a principal residence in 3 years, so a divorce, a sale, or a stretch of renting can put you back in the pool.
• Assistance sizes vary widely by agency: Michigan’s MI 10K DPA Loan tops out at $10,000 while Palm Beach County, Florida, awards up to $100,000 as a 0% deferred loan forgiven after 30 years, and structure matters as much as size, because a grant is kept and a deferred loan is repaid.
• Expect three gates on almost every program: An income limit (Fannie Mae’s HomeReady and Freddie Mac’s Home Possible both cap qualifying income at 80% of area median income; USDA’s guaranteed loan allows up to 115%), a credit floor commonly set at 640, and a homebuyer education course before you close.

What are first-time home buyer grants and programs?

They’re subsidies, funded by federal, state, county, or city housing dollars, that reduce the cash you need at closing or the rate you pay afterward, and they’re almost never standalone checks. Assistance rides on top of a first mortgage from a participating lender, which is why the program and the loan have to be chosen together.

Who counts as a first-time home buyer?

Under 24 CFR 92.2, HUD defines a first-time homebuyer as an individual and their spouse who haven’t owned a principal residence during the three years before the purchase. Most state and local programs copy that definition word for word.

Exceptions widen the door further. HUD’s rule also counts a displaced homemaker or single parent as a first-time buyer even if they owned a home with a former spouse. Owned a home four years ago and rented since? You likely meet the first-time definition. Our first-time home buyers hub covers the rest of the journey.

Grants vs. forgivable loans vs. deferred loans

The most important question to ask about any assistance offer is how it gets repaid, because only one of these four structures is truly free money. Which is why assistance supplements, rather than replaces, how to save for a down payment. Get the answer in writing.

A fifth form of help is the first mortgage itself: state agencies fund loans through bond programs and pass the savings through, so an agency loan can price differently from the same lender’s standard offering.

What federal first-time home buyer programs are available?

The federal government doesn’t hand grants directly to individual buyers. HUD’s grant dollars flow to states, local governments, and nonprofits, which run the buyer-facing programs. What Washington offers you directly is low- and no-down-payment loans, the foundation nearly every grant sits on. The federal grant question, and why assistance reaches buyers through agencies rather than sellers, is covered further down this page.

• FHA loans: 3.5% down with a credit score of 580 or higher, or 10% down for scores of 500 to 579. FHA permits down payment assistance from a state or local government entity, which is why it’s the most commonly paired first mortgage in assistance programs.¹
• VA loans: No down payment and no monthly mortgage insurance for eligible veterans, service members, and surviving spouses. The tradeoff is a funding fee. 2.15% of the loan amount for a first-use purchase with less than 5% down. Which can be financed and is waived for veterans receiving service-connected disability compensation.²
• USDA loans: 100% financing in eligible rural areas, much of Michigan outside the Detroit and Grand Rapids cores, for households under 115% of area median income. USDA’s Section 502 Direct loan goes further, using payment assistance to push the effective rate as low as 1% for very-low-income buyers.
• HomeReady and Home Possible: Fannie Mae’s and Freddie Mac’s affordable conventional loans, 3% down, income capped at 80% of area median income, reduced mortgage insurance above 90% LTV, and gifts or grants accepted as your down payment source. Earn too much? Fannie Mae’s standard 97% LTV option is also 3% down with no income limit. Compare both against FHA in buying a home with a low down payment.
• Good Neighbor Next Door: 50% off the list price of HUD-owned homes in designated revitalization areas for law enforcement officers, pre-K through 12th grade teachers, firefighters, and EMTs. You sign a silent second for the discount and commit to 36 months of occupancy.
• Section 184: Low down payment and flexible underwriting for members of federally recognized tribes, on and off native lands, with an upfront loan guarantee fee that can be financed into the loan and an annual fee collected monthly.

Is there a federal first-time home buyer tax credit?

No. The federal first-time homebuyer credit required a binding contract before May 1, 2010 and a closing by September 30, 2010, and it hasn’t been available since. Proposals to revive it surface regularly; none has become law, so don’t build a budget around one.

What does exist is the mortgage credit certificate, or MCC. State housing agencies issue MCCs that convert part of your annual mortgage interest into a dollar-for-dollar federal tax credit. It’s nonrefundable, so it can’t exceed what you owe in federal tax, and selling within nine years can trigger recapture. Talk with a tax professional before you count on the benefit.³

How to find first-time buyer programs in any state

Work outward in three rings: your state housing finance agency, which sets the statewide rules; your county and city housing office, where the largest per-buyer awards often hide, Palm Beach County, Florida, offers up to $100,000 as a 0% loan forgiven at the end of a 30-year term; and finally employer and profession-based programs.

HUD’s home buyer grant resources index homebuying programs state by state, and our roundup of state-specific mortgage assistance programs covers how the agencies differ. A lender who works across many programs will find layers you won’t.

What does first-time buyer assistance require?

Nearly every program tests the same four things: income, purchase price, credit, and education. Clear those and the application is short, because assistance underwrites alongside your first mortgage.

Income limits and purchase price caps

Income limits generally land between 80% and 140% of area median income, with the most generous assistance reserved for the lower end of that band. Three anchors are worth memorizing: HomeReady and Home Possible both cut off at 80% of AMI, USDA’s guaranteed loan allows up to 115%, and state agency limits sit wherever bond authority puts them, MSHDA’s Macomb County non-targeted limits of $104,800 and $120,520 sit well above local median income.

Purchase price caps travel with income limits, and targeted-area designations usually raise both. The charts change annually and vary county by county, so check the current numbers before you conclude you earn too much.

Credit score and the loan you attach it to

640 is the number to plan around. It’s MSHDA’s minimum for the MI Home Loan and a common floor across state agency programs, even though FHA itself will insure at 580 with 3.5% down. The assistance, not the loan type, usually sets your credit bar.

Your cash reserves matter too: some assistance looks at what you hold as well as what you earn, so ask before you move money between accounts. Our guide to how to save for a down payment covers where to keep it while you save.

Homebuyer education is an eligibility item, not a formality

Treat the course as a hard requirement with a certificate attached, one of several boxes first-time home buyers have to check. MSHDA requires HUD-approved counseling for MI 10K DPA borrowers. Fannie Mae requires it when all occupying borrowers on a HomeReady purchase are first-time buyers, satisfied by its free HomeView course; Freddie Mac requires it on Home Possible, satisfied by CreditSmart Homebuyer U or a HUD-approved agency.

Find a provider through HUD-approved homebuyer education and counseling, or call HUD’s counselor line at 800-569-4287; these agencies charge little or nothing. Schedule it early. A missing certificate is a common reason a file stalls days before closing.

How to apply, step by step

• 1. Confirm your first-time status: Check the 3-year lookback against your history, including any home you co-owned.
• 2. Pull your income and price limits: Get the current chart for your county and household size from the agency.
• 3. Get preapproved with a participating lender: Assistance runs only through approved lenders, and not every lender is approved for every layer.
• 4. Complete the education course: Do this in week one, not week six. Certificates are dated and some programs require a face-to-face class.
• 5. Reserve the funds, then shop: Many agencies commit assistance first-come at loan reservation, so your file has to be far enough along to lock.

Two mistakes cost buyers the most: assuming a high income disqualifies you before checking the county chart, and choosing a lender before choosing the program. Our 15 first-time home buyer tips covers the sequencing.

What Michigan buyers should know about MSHDA assistance

In Michigan, the Michigan State Housing Development Authority is the gateway, and its stack is simple enough that most buyers can tell in five minutes whether they fit. MSHDA calls the down payment the biggest barrier to homeownership.

• MI Home Loan: MSHDA’s first mortgage, available to first-time buyers statewide and repeat buyers in targeted areas, with a minimum credit score of 640. It can be structured as conventional, FHA, VA, or USDA Rural Development financing.
• MI 10K DPA Loan: Up to $10,000 toward down payment, closing costs, and prepaids, statewide, as a 0% non-amortizing second, repaid when you sell, refinance, pay off the first mortgage or stop living in the home. It must pair with an MI Home Loan.
• Sales price and income limits: MSHDA’s statewide sales price limit is $566,355 effective June 1, 2026. Income limits vary by county, household size, and targeted-area status.
• Homebuyer education: Every MI 10K DPA borrower completes a class from a HUD-approved housing counseling agency, and the certificate goes to MSHDA underwriting with the credit package.
• Mortgage credit certificate: MSHDA also issues MCCs worth 20% of annual mortgage interest to first-time buyers statewide and repeat buyers in targeted areas, see first-time home buyer tax credits.

Here’s how that math lands. On a $250,000 home in Waterford with FHA financing, the 3.5% minimum down payment is $8,750. A $10,000 MI 10K DPA Loan covers that entire down payment and leaves about $1,250 toward closing costs, turning a five-figure cash requirement into something closer to your earnest money and inspection fee.⁴ Our 15 first-time home buyer tips cover what to do with the cash you free up.

One honest caution: assistance money is appropriated, and appropriations run out. MSHDA’s First-Generation pilot offered $25,000 to buyers whose parents hadn’t owned a home in the prior three years, and it closed once its funds were exhausted. Check current availability on MSHDA homeownership programs rather than on a blog post including this one.

How do you choose a lender for MSHDA down payment help?

MSHDA does not hand assistance to buyers directly. Its help comes through a participating lender, attached to an MSHDA MI Home Loan first mortgage. So the lender you pick decides whether the help is available to you at all.

Is MSHDA help a grant?

No. The MI 10K DPA is a loan of up to $10,000, with no interest and no monthly payment. You repay it when you sell, refinance, pay off the first mortgage, or stop living in the home. A grant is never repaid. That difference matters if you expect to move or refinance within a few years. MSHDA sets a 640 minimum credit score for this help, and its statewide sales price limit is $566,355, effective June 1, 2026.

Questions to ask a lender before you apply

• Are you approved for MSHDA loans? Only participating lenders can offer them. Ask how recently they closed one.
• Will you price it both ways? Ask for the MSHDA version beside a standard FHA or conventional loan with no assistance. You see what the help costs, not only what it covers.
• How does MSHDA’s review fit my closing date? MSHDA reviews the loan package before closing. A lender who does this often helps you build that time into the contract dates.
• When should I take the homebuyer class? Before you write an offer. The certificate is required, and a missing one can hold up a closing.
• Which income limit applies to me? Limits vary by county and household size, so ask for the chart that covers the home you want.

What Oakland County buyers should add to the math

Budget with your own tax bill, not the listing’s. The year after a Michigan home sells, its taxable value resets to half of the assessor’s market value, so the seller’s tax bill is not your tax bill. Our Michigan property tax uncapping study shows how large that reset runs, county by county.

Align places MSHDA’s MI Home Loan and the MI 10K DPA, so Samantha can build the assisted and unassisted versions of your loan from one application. She lives and works in Oakland County, and you can meet with her at 2625 Pontiac Lake Road in Waterford. Build your homebuyer game plan.

Is there a $25,000 federal first-time buyer grant?

No. Not as federal law, and not at $25,000. The figure comes from earlier versions of the Downpayment Toward Equity Act, which never passed. The 2025 versions, S. 967 in the Senate (introduced March 11, 2025) and H.R. 4069 in the House (introduced June 23, 2025), would cap a grant at the greater of $20,000 or 10% of the purchase price. They would limit it to first-time, first-generation buyers with household income up to 120% of area median income, or 140% in high-cost areas. As of October 2026, the official bill status records show both still sitting in committee, with no action since they were introduced.

Treat it as a proposal. Be skeptical of any website or lender advertising a $25,000 federal grant as available today, and plan around programs that are funded now.

Why assistance comes from agencies, not sellers

FHA does not let the seller, the real estate agent, the builder or anyone else with a stake in the sale pay your minimum required down payment. Those contributions can go toward closing costs, prepaid items and discount points, within FHA’s 6% limit, but not the down payment itself. A government agency acting in its governmental capacity can provide that money through its homeownership programs. That is the reason down payment help in Michigan flows through MSHDA rather than through a seller credit. The rules are in HUD’s Single Family Housing Policy Handbook 4000.1. For what a seller can cover, see our guide to seller-paid closing costs.

A pricing break that is not a grant

Fannie Mae and Freddie Mac charge upfront pricing fees on most conventional loans. Both waive or cap those fees for loans with a first-time buyer whose income is at or below 100% of area median income, or 120% in high-cost areas. Freddie Mac’s Seller/Servicer Guide caps its credit fees at zero for these loans. The fee is charged to the lender, so how much of the break reaches you depends on the pricing you are offered. Ask whether your loan was priced with the first-time buyer waiver applied.

FAQ: First-time home buyer grants and programs

Here are answers to common questions about first-time home buyer grants and programs.

Who qualifies as a first-time home buyer?

Anyone who hasn’t held an ownership interest in a principal residence during the past three years qualifies under the definition most programs use, even if they owned a home years ago. Newer first-generation programs are stricter, requiring that neither you nor your parents have owned. Each program then layers on income limits, price caps, credit minimums, and owner-occupancy rules. Each program publishes its own definition, so check it before you count on the money.

Is down payment assistance free money?

Sometimes. True grants are never repaid. Forgivable loans erase a portion each year you stay in the home, becoming free if you remain long enough, often five to twenty years. Deferred loans charge no interest but must be repaid when you sell, refinance, or pay off the mortgage. Always confirm which type you’re offered and what triggers repayment, and keep saving either way, because our guide to how to save for a down payment explains why assistance rarely covers everything.

Can I combine multiple home buyer assistance programs?

Often yes, a strategy called stacking. Buyers commonly pair a state agency first mortgage with its down payment assistance loan, then add a county grant and seller-paid closing costs. Each program has to permit the others, and combined assistance can’t exceed the cash you actually need at closing. A lender familiar with layering handles the coordination, start by mapping what’s available through state-specific mortgage assistance programs.

Do first-time buyer programs have income limits?

Nearly all do. Limits typically fall between 80% and 140% of your area’s median income depending on the program and household size, with the most generous forgivable assistance reserved for lower-income buyers. Purchase price caps apply too. Because limits vary county by county and change annually, check your state agency’s current charts before assuming you earn too much, and see our first-time home buyers hub for the rest of the qualifying picture.

The bottom line on first-time home buyer grants and programs

First-time home buyer grants and programs erase the down payment and closing costs, and assistance commonly runs from a few thousand dollars to $10,000 in statewide programs, with a handful of county programs reaching $100,000. You likely qualify if you haven’t owned a principal residence in the past three years. Your state housing finance agency is the front door in Michigan, MSHDA’s MI 10K DPA Loan puts up to $10,000 toward closing as a 0% loan repaid when you sell, refinance, pay off the first mortgage or move out. Plan around three gates: an income limit, a credit floor commonly set at 640, and a homebuyer education certificate. Then ask one question about every offer: grant, forgivable loan, or a lien that comes due at sale?

If you’re ready to buy your first home with the least cash out of pocket, talk to Align Lending, we’ll shop your scenario across our lender network, layer the assistance your situation allows, and show you the cash-to-close numbers side by side. Call 248-506-5727 or start online today.

Footnotes:

1. Align Lending is not acting on behalf of or at the direction of FHA or HUD. FHA credit score, down payment, and acceptable-source-of-funds requirements are set by HUD and are subject to change. Return to text.

2. Align Lending works with VA-approved lenders and is not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency. VA funding fee amounts and exemptions are set by the Department of Veterans Affairs and are subject to change. Return to text.

3. This is not tax advice. Mortgage credit certificate eligibility, the value of the credit, and recapture rules are governed by federal tax law and administered by the issuing housing finance agency. Consult a qualified tax professional about your situation. Return to text.

4. Example figures are hypothetical and for educational purposes only; they do not constitute an advertisement of credit terms or a rate quote under federal or state lending laws. Your loan amount, assistance eligibility, and cash to close depend on your application, the property, program availability at the time of reservation, and market conditions. Program terms shown are those published by the administering agency and are subject to change. Return to text.

Sources: first-time homebuyer definition and three-year lookback, 24 CFR § 92.2 (U.S. Department of Housing and Urban Development). FHA 3.5% minimum down payment at a 580 credit score and 10% at 500 to 579, HUD Single Family Housing Policy Handbook 4000.1 and HUD FHA Answers. Governmental entity down payment assistance as an acceptable source of funds, HUD Mortgagee Letter 19-06. VA no-down-payment and no monthly mortgage insurance, and the 2.15% first-use funding fee for purchases with less than 5% down (effective April 7, 2023) with exemptions for service-connected disability compensation, U.S. Department of Veterans Affairs. USDA Single Family Housing Guaranteed Loan Program 100% financing and 115% area median income limit, and Section 502 Direct payment assistance reducing the effective rate to as low as 1% with 33- and 38-year terms, USDA Rural Development. HomeReady 3% down, 80% AMI qualifying income cap, reduced MI above 90% LTV, and homeownership education requirement, Fannie Mae; Standard 97% LTV option income-limit-free, Fannie Mae. Home Possible 3% down, 80% AMI cap, and CreditSmart Homebuyer U education, Freddie Mac. Good Neighbor Next Door 50% list-price discount, eligible professions, silent second mortgage, 36-month occupancy, and 7-day listing period, HUD. Section 184 eligibility, on- and off-native-land use, and financeable upfront and annual loan guarantee fees, HUD. First-time homebuyer credit binding-contract deadline of May 1, 2010, closing deadline of September 30, 2010, and its unavailability for later purchases, Internal Revenue Service Instructions for Form 5405; mortgage interest credit and MCC recapture, IRS Form 8396 and Taxpayer Advocate Service. MSHDA MI Home Loan 640 minimum credit score, MI 10K DPA Loan up to $10,000 as a 0% non-amortizing second, repaid on sale, refinance, payoff of the first mortgage or end of owner occupancy, HUD-approved homebuyer education requirement, $566,355 statewide sales price limit effective June 1, 2026, Macomb County non-targeted income limits of $104,800 and $120,520, 20% mortgage credit certificate rate, and the closed First-Generation DPA pilot, Michigan State Housing Development Authority. Purchase assistance of up to $100,000 as a 0% deferred loan secured for 30 years and forgiven at the end of the term, Palm Beach County, Florida Department of Housing and Economic Development. HUD-approved housing counseling availability at little or no cost and the 800-569-4287 counselor line, HUD.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Grant and assistance program terms, income and sales price limits, and tax treatment of mortgage credit certificates change frequently and vary by county; confirm current terms with the administering agency and consult a qualified tax professional about your situation. Program figures shown are illustrative, are not a rate quote or an offer of credit, and are subject to change. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.

Related resources

12-minute read

15 first-time home buyer tips for a smoother purchase

Learn 15 first-time home buyer tips covering credit, down payments, preapproval and closing costs so you can buy your first home with fewer surprises.

Read more

12-minute read

Renting vs. buying a home: A true financial comparison

Compare renting vs. buying a home with real numbers (monthly costs, price-to-rent ratios, equity and opportunity cost) to see which wins for your situation.

Read more